Caching 101: What's the ROI?

This week we examine how caches can help you grow revenue while cost-effectively scaling your network infrastructure.

by Amit Pandey
Director of NetCache, Network Appliance, Inc.

Q: What impact do web caches have on an ISP's revenue?

A: To start with intangible factors, caches can have an immediate impact on customer service and satisfaction through its improvement of Internet performance. This in turn can boost customer acquisition. An increase of 200 new customers at $20 per month will recover the investment costs of a cache within about six months.

In addition to improved response times, caches provide a platform to cost-effectively add value services to their customers, such as content filtering and Usenet (NNTP) services. Caches let ISPs implement these types of services without taking up additional bandwidth, because the services are managed through the cache. These types of services enhance an ISP's value proposition, translating into higher revenue.

Q: Does caching bring any direct cost savings to ISPs?

A: You bet. Caching is one of the most effective ways to control bandwidth costs. By serving repeat requests for content from the local cache, ISPs offload traffic from their Internet connections and related routing infrastructure, thus reducing their communications costs significantly.

Q: How do I calculate the bandwidth ROI for caching?

A: The key factors in calculating the ROI of caching on the cost saving side are:

• The monthly Internet connection bandwidth costs
• The byte hit rate expected on the cache at peak load
• The cost of the cache

Example: If an ISP has deployed six T1 lines, costing $9,000 per month, and expects a 50 percent hit rate, the ISP has cut its bandwidth requirements in half, saving approximately $4,500 per month. This savings will give the ISP a 4½ month payback on a $20,000 cache investment.

If their traffic is growing rapidly, an ISPs can also avoid the need for adding bandwidth connections to the backbone. The six T1 connections with a cache delivering 50 percent hit rate could now support traffic for a fractional T3 connection, which would otherwise cost about $18,000. Therefore, the savings equate to $9,000 per month, resulting in a payback of just over 2 months for the $20,000 cache.

Q: Are there secondary cost savings ISPs should know about?

A: In addition to basic ROI benefits, a cache will also provide savings in these areas:

Network infrastructure: Reduced routing costs by offloading the connection to the backbone.

Usenet (NNTP) traffic: Cache appliances used for Usenet traffic can serve several times more content than individual news servers. For example, a farm of one feeder and five news readers would cost perhaps $30,000 to deploy, and about twice that in annual support costs. Replace this model with a single server acting as a combined news reader/feeder, along with a cache, such as the NetCache appliance, to accelerate news traffic and scale the reader. Both the investment cost of this architecture and the ongoing support costs would be less than the former expense.

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